The Australian Shareholders Association has applied to the Takeovers Panel to stop Virgin Australia's controversial capital raising from going ahead.

The association's Stephen Mayne alleges Virgin has gone to extraordinary lengths to ensure its three major shareholders - Air New Zealand, Etihad and Singapore Airlines - are the major beneficiaries of the raising.

Mr Mayne believes a restriction on how many new shares retail investors can buy is unfair.

He is also asking the panel to stop Etihad from being able to buy more shares within the next six months, saying it would be in breach of takeover rules.

Last week, Virgin said it would raise up to $350 million through a share buyback.

Qantas also called for government intervention to stop the move, saying it was unfair and uncompetitive, and amounted to a foreign takeover.

Virgin says all shareholders are being treated equitably and the buyback will strengthen the company, creating new jobs and ensuring a competitive aviation market for Australia.